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Failure in the cryptocurrency sector is about as common as seeing trees in a forest. In fact, Bitcoin Newsrecently pointed out that 46 percent of all ICOs that started in 2017 have already failed.

A lot of people who are backing cryptocurrencies don't know this, and to a point, it's almost a taboo subject in the trade. Most investors, as well as startup owners, have a hard time figuring out why most ICOs fail.

If you're wondering why so much failure happens in the world of Initial Coin Offerings, don't. There's a multitude of reasons this happens—including these major issues below.

Most ICO developers don't really think about how cryptoeconomics work.

In order for a cryptocurrency to succeed, you need to understand the economy that they create. Most developers love to work on the code of their cryptocurrency, but are loathe to actually think about the economics aspect of launching an ICO.

Simply put, they offer very little in terms of spending capability and do very little to try to bolster the currency's value. There's no hype, no ease of use... just code. Even when there is hype, it's rarely hype that continues because they don't give people much reason to demand their currency.

Considering that there's often such focus on the code rather than the economy, is it really surprising to figure why most ICOs fail on this front?

Another major reason why most ICOs fail also deals with marketing.

There are two critical mistakes that tend to show up with ICOs. Either ICOs get released with little marketing to make people aware of their existence, or they end up being over-hyped.

Believe it or not, over-hyping and under-hyping can both cause ICOs to fail. Under-hyping an ICO is an obvious way to cause an ICO failure. However, to understand the dangers of over-hyping, you have to see things from a bigger perspective...

Most ICOs do not actually have a function anymore, which ends up being a sign of long term failure.

It used to be that ICOs were very function-oriented. They were raising money to promote new technology or help improve the overall status of the cryptocurrency being made.

Back in the day, ICOs also had additional benefits, like acting as a toll to access site perks or being able to be used as a way to vote in certain polls. Most ICOs no longer do much of anything except to act as a conduit to get more Ethereum later on.

One of the reasons why most ICOs fail is because they don't really add anything new to the mix. These days, an ICO often will involve one small tweak (if even that) to an already-extant cryptocurrency. They may not even have a reason why someone should invest in them.

All they do is soak up more hype. That's not a good look.

To make matters worse, the investment hype around ICOs has spoiled developer plans.

Investment hype around ICOs and all the talk about finding the "next big cryptocurrency to boom" has made investing as trendy as can get. This has led to a lot of investors who don't know much about blockchain, but who will still willingly plunk down millions of dollars in a variety of ICOs.

Since a lot of the investments are pure speculation with little science to them, shiny white papers now give many ICOs more profit than a coin that actually contributes something to the technosphere.

A lot of developers of ICOs now operate by "the Greater Fool Theory." In other words, ICOs now bank more hope on getting people irrationally attached to their cryptocurrency than they do on the actual functionality of what they're supposed to offer.

Operating by the Greater Fool Theory is a great way to inflate currency values until they burst. This turns the vast majority of ICOs that operate this way into bubbles.

When you add the crazy hype with the lack of due diligence that plagues the ICO-sphere, you get disaster.

People are really, truly swept up in the cryptocurrency hype right now. Many who are aware of the failure rate of ICOs still don't seem to care, and throw caution to the wind. This leads to people who leap before they look, and as any good investor knows, that's a recipe for disaster.

Part of the reason why most ICOs fail is due to the kind of terrible investors they attract. The moment an ICO's value starts to dip, people who didn't do due diligence often freak out. This leads to panic selling, which eventually leads to a crash in value. And, just like that, the ICO dies.

Making matters worse is the issue of "token velocity."

Along with shabby investment ideas, one of the most telling reasons why most ICOs fail deals with "token velocity." Simply put, most people see ICOs as a "flash in the pan" investment that should get them rich quickly.

So, with most people, this leads to them buying up ICO tokens as soon as they become available. They wait for them to increase in price and sell them off. When people who would go long-term investing see this trend, they tend to sell them off as well.

Not many cryptocurrencies present themselves as long-term investments. As a result, they end up being short-term products. The only reason that Bitcoin remains so steady is because people are choosing to hold onto it.

Then, there's also the matter of security.

The third biggest category of reasons why most ICOs fail deals with security. Cryptocurrencies are notoriously shaky when it comes to security, and that means that there's a serious risk that investors might end up having their investments stolen from them.

Whether it's due to poor use of coding, bad key management, or a Bitcoin wallet scam doesn't matter. If you're a new ICO and you end up being the center of a major coin theft or data breach, your reputation will be ruined and the ICO will quickly become worthless.

However, that's not the only technical issue worth discussing.

Imagine being told that you could invest in a product concept that sounded amazing. You invest in it gleefully, then when the product comes out, it's grossly underwhelming. You then get upset, ask for your money back, and wonder why you didn't take a look at a prototype first.

This is exactly the scenario that happens when you're investing in an ICO that's hyped as a concept, rather than an ICO with an alpha release. Since so many people tend to invest in the concept and hype rather than the actual product they can make, it's not surprising that ICOs without an "alpha" version of their product fail.

Then, there's also the matter of the sheer number of coin scams out there.

Part of the reason why most ICOs fail is that there have been a huge number of ICO scams over the years. ICOs and blockchain-related industries aren't as regulated as regular businesses. This makes them prone to being used as a vehicle for scam artists.

Overall, the easiest way to make money from an ICO is to understand why most ICOs fail—and find the currency that doesn't make those mistakes.

Like with any investments, knowing how to spot a scam and realizing when you're being sold a bad concept is half the battle. As long as you do your research and be careful where you invest, you still can make a profit with ICOs.